Zero-rated supply under GST: exports and SEZ supplies
A zero-rated supply is an export of goods or services, or a supply to an SEZ, that bears no GST while input tax credit remains available.
Short answer
A zero-rated supply under section 16 of the IGST Act, 2017 is an export of goods or services, or a supply to a Special Economic Zone developer or unit for authorised operations. No GST is ultimately borne on such supplies, but the supplier can still claim input tax credit and a refund.
- Governed by
- Section 16, IGST Act 2017
- Includes
- Exports, and supplies to SEZ units or developers
- ITC
- Fully available
- Routes
- Under LUT without IGST, or with IGST and refund
Zero-rated versus exempt
The difference matters because it affects credit. An exempt supply, such as certain healthcare services, carries no GST, but the supplier must reverse the input tax credit relating to it, so the GST on inputs becomes a cost. A zero-rated supply also carries no GST in the end, but the supplier keeps the input tax credit and can claim a refund of it, so the export leaves India free of tax.
When a service counts as an export
Under section 2(6) of the IGST Act, a supply of services is an export only if all of the following conditions are satisfied. If any condition fails, the supply may be taxable.
- The supplier is located in India
- The recipient is located outside India
- The place of supply is outside India
- Payment is received in convertible foreign exchange, or in Indian rupees where the RBI permits
- The supplier and recipient are not merely establishments of the same person
Why it matters for startups
Software, design and consulting startups with overseas clients often make zero-rated supplies. To benefit, file an LUT each year or pay IGST and claim a refund, ensure each contract and invoice supports the export conditions, and keep evidence of foreign exchange receipts. Supplies to SEZ units need the SEZ authorisation and endorsement to be treated as zero-rated.
Related services
Sources
Written by the Refogo Editorial Team from the official sources above and checked on 2026-10-31. Laws, rates and due dates change, and authorities often extend deadlines, so confirm your own case with a qualified professional. This is general information, not legal or tax advice. Read our editorial policy or report an error to support@refogo.com.
Common questions
Is export of services always zero-rated?
Only if all the conditions in section 2(6) of the IGST Act are met, including place of supply outside India and receipt of payment as required.
Can I claim a refund of ITC on zero-rated supplies?
Yes. Under LUT you can claim a refund of unutilised input tax credit, or you can pay IGST and claim a refund of that tax.
Are supplies to SEZ units zero-rated?
Yes, when made to an SEZ developer or unit for authorised operations, with the required documentation.